Iran's economy is marked by a bloated, inefficient state sector, over reliance on the oil sector, and statist policies that create major distortions throughout. Most economic activity is controlled by the state. Private sector activity is typically small-scale - workshops, farming, and services. President KHATAMI has continued to follow the market reform plans of former President RAFSANJANI, with limited progress. Relatively high oil prices in recent years have enabled Iran to amass some $40 billion in foreign exchange reserves, but have not eased economic hardships such as high unemployment and inflation. The proportion of the economy devoted to the development of weapons of mass destruction remains a contentious issue with leading Western nations.